State auditor: Perth Amboy schools could have saved $49.1 million on health benefits

A New Jersey State Auditor report found Perth Amboy Public Schools spent far more than necessary on employee health coverage from FY2020–2024 by skipping required comparisons to the School Employees’ Health Benefits Program — while its broker also collected undisclosed commissions.

PERTH AMBOY — Perth Amboy Public Schools could have saved approximately $49.1 million — an average of about 18 percent — on employee health benefits from fiscal years 2020 through 2024 had it participated in the New Jersey School Employees’ Health Benefits Program (SEHBP), according to a report by State Auditor David J. Kaschak.

The audit covers district financial activity for July 1, 2021 through June 30, 2025, and separately analyzes health-benefits costs for July 1, 2019 through June 30, 2025.

Health-benefits findings (auditor)

From the audit text:

• The district used the same insurance broker from FY2020 through FY2024. That broker did not conduct and provide a health-benefits cost comparison showing savings available by switching to SEHBP for most of that period; a comparison for FY2025 came too late to switch for that year.
• Recalculating costs under SEHBP’s four coverage tiers (vs. the district’s two-tier single/family design), auditors found about $49.1 million in potential premium savings for FY2020–2024.
• The broker was paid a flat rate by the district but was later found also to be receiving commissions from health and prescription vendors — payments that should be disclosed under state requirements. “While not uncommon in the insurance industry, the commission-based arrangement gives the broker no incentive to recommend less costly alternatives because it earns more when the district pays more for benefits,” the audit states.
• Employees could have saved about $2.2 million in contributions from FY2021–2024 (about 33 percent on average) under SEHBP contribution math, auditors found.

The audit’s primary objective also examined factors behind a FY2022 General Fund budgetary deficit of $13,040,742; health benefits are one of several findings (preschool, background checks, ASSA aid, expenditures, payroll, IT, etc.).

District response

In the auditee response printed with the report, business administrator/board secretary Michael LoBrace wrote that Perth Amboy Public Schools “acknowledges the audit’s observations and findings and affirms that appropriate corrective measures have been implemented, with additional actions in progress.” The same response states that after analysis from a current broker, the district enrolled in SEHBP, converting over 4,500 covered lives and realizing significant projected savings — a district estimate of $27 million. That $27 million figure is the district’s forward-looking estimate in the auditee response, not the auditor’s retrospective ~$49.1 million potential-savings finding for FY2020–2024.